Why Your Card Rate Is Only Part of the Cost of Taking Payments

When businesses compare payment providers, the conversation often starts with one number: the card rate. 0.8%. 1.2%. 1.5%.

It is an easy number to compare, which is precisely why it receives so much attention. But the cheapest transaction rate does not necessarily mean the cheapest — or best — payment setup.

Payments sit inside a much larger commercial system. How your terminals connect to your till, how online payments are handled, when money reaches your account, how easily transactions can be reconciled and how much administration the setup creates can all matter alongside the headline rate.

The better question is not simply:

“What percentage am I paying?”

It is:

“How well does my payment setup work for my business?”

A card transaction can involve several different costs.

Depending on the provider and pricing model, these can include processing charges, scheme fees, interchange, authorisation charges, terminal rental, gateway charges and other service fees.

Some providers combine these into a simple blended rate. Others separate them. Neither structure is automatically better.

What matters is understanding what the business actually pays across its complete mix of transactions.

A business taking mostly consumer debit cards at a physical counter has a very different payment profile from one accepting corporate cards, telephone payments and international ecommerce transactions. Comparing two headline percentages without understanding that transaction mix can therefore be misleading.

Suppose Provider A costs slightly less each month than Provider B. On price alone, Provider A wins.

But imagine Provider A's terminal operates independently from your EPOS. Every sale requires the employee to enter the amount into the till and then enter it again into the card terminal.

That creates another cost: work.

It might only take a few seconds each time, but multiply those seconds across hundreds or thousands of transactions. It also creates another opportunity for mistakes.

• £27.50 becomes £72.50.
• A payment is taken but the till transaction is cancelled.
• The till says one figure while the terminal says another.

Someone eventually has to investigate the difference. A payment provider therefore shouldn't be considered separately from the rest of the business.

Another frequently overlooked part of payments is what happens after the customer pays. A successful card transaction does not mean that money is immediately available in the business bank account.

Settlement arrangements vary. For a business with healthy cash reserves, the difference between receiving money quickly and waiting several days may not matter very much. For another business — particularly one buying stock frequently or operating on tight working capital — it can matter enormously.

A slightly higher processing cost accompanied by significantly better access to funds could potentially be more valuable than the cheapest possible card rate.

This is why Node considers payments, banking and settlement together rather than treating them as unrelated products.

Businesses increasingly sell through more than one channel. A shop may take payments:

• at the counter
• through its website
• over the telephone
• through payment links
• through local delivery or click & collect orders

If each channel has been added independently over several years, the business can end up with multiple providers, reporting systems and settlement processes.

Nothing may technically be broken. But the owner has to assemble the complete picture manually. That's a systems problem rather than simply a payments problem.

At some point, sales need to become useful financial information. The business needs to understand what it sold, what was paid, what fees were deducted, what was refunded and what eventually arrived in the bank.

When systems communicate properly, much of that journey can happen automatically. When they don't, someone has to bridge the gaps.

• Usually with spreadsheets.
• Or exports.
• Or by logging into several dashboards.
• Or by sending information manually to the accountant every month.

That time has a value.

The payment rate still matters. Nobody should pay more without a reason. But it should be considered alongside the wider setup:

• Cost
• Integration
• Settlement
• Reconciliation
• Reliability
• Administration

The best payment solution is therefore not necessarily the provider offering the smallest number on a quote. It is the one that fits most effectively into the way the business actually operates.